Business Process Outsourcing (BPO) is generally refers to the delegation of certain operations of an enterprise to service providers having expertise and specialization in dealing with these operations. There are several factors in outsourcing certain operations for an enterprise. The primary factors for outsourcing can be for example, controlling and reducing operating cost, redirecting resources from one operation to a more critical operation, non availability of resources internally to handle certain operations and a need to focus on the more critical operations.
There exist several methods for analyzing suitability of a business process for outsourcing. The methods analyze the outsourcing of the business process with respect to the cost reduction potential.
An existing outsourcing decision making tool, “Identeon Opportunity & Site analysis Tool”, disclosed by Syntel, Inc. measures business processes on two factors through a predetermined set of parameters. The factors are opportunity analysis and site analysis. The opportunity analysis helps in identifying the business processes that can be outsourced. The site analysis helps in identifying an appropriate location for the business process. The business processes are studied in detailed using the approach.
Another existing solution, “the pH Matrix”, disclosed by iGate Global solutions, identifies outsourcing suitability of business processes in an enterprise through a detailed evaluation of these business processes along with an estimate of the financial benefits likely to accrue by outsourcing these processes.
In addition, there exist several strategic framework techniques for identifying outsourcing suitability of business processes. One such technique, “The Yang-Huang model (Yang, C. & Huang, J. 2000)” is a framework which utilizes the Analytic Hierarchy Process (AHP) method to aid users in structuring problems related to outsourcing decision making. The AHP method works on the principle that a complex problem can be dealt with by decomposing it into sub-problems within a hierarchy.
Another strategic technique, “The McIvor Framework (McIvor, R. 2000)”, addresses the outsourcing decision making process by integrating established key theories associated with outsourcing such as core competency thinking, value chain perspectives and supply base influences. It is comprised of four stages, namely definition of the core activities of the business, evaluation of the value chain activities, total cost analysis of the core activities and relationship analysis.
However, each of these prior art suffers from one or more of the following limitations. A majority of outsourcing process selection decisions are taken on cost reduction potential alone, without a detailed understanding of the business process, of the service provider's competence vis-à-vis business process requirements and without quantification of the possible financial benefit. Further, each business process is evaluated and analyzed in detail without a preliminary screening of these business processes to arrive at a shortlist of business processes having potential of being outsourced. Therefore, the approach of evaluating each business process is too tedious and time consuming. Also, the strategic techniques are qualitative in approach and therefore lack the objectivity required in the outsourcing decision making. In addition, the strategic techniques lack an organizational dimension and focus mainly on the business and technical dimensions. Therefore, missing out on an overall impact of an outsourcing decision on the enterprise.
There is therefore a need for an objective, robust and practical method and system for determining outsourcing suitability of a business process in an enterprise.